Does good governance matter for FDI inflows? Evidence from Asian economies

Mengistu, Alemu Aye; Adhikary, Bishnu Kumar

doi:10.1080/13602381003755765

Cited by 158 publications

(121 citation statements)

References 42 publications

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“…Our findings reveal that improvements in the political system as well as fundamental rights and freedom of expression along with a free media can boost FDI and further encourage MNCs to bring capital into a host economy. This result is in line with previous studies (Busse, ; Kurul & Yalta, ; Mengistu & Adhikary, ). However, ‘Rule of law’ is found to exert a negative and significant effect on FDI at the 10% significance level.…”

Section: Resultssupporting

confidence: 94%

“…Empirical results are in line with those of Busse and Hefeker () providing strong evidence that a low level of political risk along with a favourable business climate have meaningful impacts on FDI. Mengistu and Adhikary () investigated the effect of good governance on FDI in 15 Asian countries for the period 1996–2007. Their results show that FDI in Asian countries is significantly influenced by the main indicators of good governance.…”

Section: Literature Reviewmentioning

confidence: 99%

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Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Younsi

Bechtini

2019

Econ of Transit and Inst Chang

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This paper assesses the impact of institutional factors on foreign direct investment (FDI) attractiveness using a pool of 25 emerging host countries (ECs) for the period 1996–2012. In particular, the paper aims to examine whether higher institutional quality and good governance do improve FDI attractiveness, and thereby to identify which institutional factors are the main drivers of FDI in ECs. Using a static and dynamic panel gravity model with various estimation techniques, we find that FDI is positively and significantly influenced by political stability, government effectiveness and regulatory quality. The remaining set of governance indicators is found to be statistically significant and negatively linked to FDI. Our findings also show that factors like a larger GDP per capita difference between investing partner and ECs, higher degree of trade openness and better infrastructure have positive and significant effects on FDI attractiveness. These results have important policy implications for ECs. Fostering FDI inflows into these countries requires policymakers to improve the quality of their institutions and business climate through implementing sound economic policies and regulations.

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Section: Resultssupporting

confidence: 94%

Section: Literature Reviewmentioning

confidence: 99%

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Younsi

Bechtini

2019

Econ of Transit and Inst Chang

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“…Daude and Stein (2007), analysing bilateral FDI stocks, find that a credible and efficient government and market-friendly regulations seem to be important determinants of FDI, thus confirming the positive impact of institutional quality on FDI. Similarly, Mengistu and Adhikary (2011) find evidence that political stability, good public and civil services, an improved legal system and low levels of corruption promote FDI, while Buchanan, Le, and Rishi (2012) find a significantly positive effect of good governance on FDI. Several empirical studies confirm the positive relationship between free markets and foreign investment (Bengoa and Sanchez-Robles 2003;Quazi 2007;Justesen 2008).…”

Section: Literature Reviewmentioning

confidence: 93%

Foreign direct investment: the role of institutional and cultural determinants

Lucke

Eichler

2015

Applied Economics

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Using panel data for 29 source and 65 host countries in the period 1995-2009, we examine the determinants of bilateral FDI stocks, focusing on institutional and cultural factors. The results reveal that institutional and cultural distance is important and that FDI has a predominantly regional aspect. FDI to developing countries is positively affected by better institutions in the host country, while foreign investors prefer to invest in developed countries that are more corrupt and politically unstable compared to home. The results indicate that foreign investors prefer to invest in countries with less diverse societies than their own.

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“…FDI is generally conducted by multinational companies (MNCs) of the developed countries so they are seen by the developing countries a primary channel for accessing to state-of-the-art technologies. Empirical studies show that human capital is one of the important determinants of FDI (Mengistu and Adhikary, 2011). The findings of some studies justify this by indicating that FDI is the most important factor that impacts positively on the economic development and growth in developing countries.…”

Section: Literature Reviewmentioning

confidence: 79%

Determinants of Human Capital Intensity: An Empirical Analysis on Automotive Suppliers in Turkey

Sönmez

2016

Gaziantep University Journal of Social Sciences

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The purpose of the paper is to analyze the determinants of human capital intensity levels of the firms with emphasize on foreign ownership and R&D activities, also to make a contribution to the scarce empirical literature in this subject. The evidence is based on a comprehensive firm-level survey data gathered through face-to-face questionnaire with the top executives of suppliers operating in Turkish automotive industry. The key findings can be summarized as: (1) foreign ownership is the only variable that has positive (and significant) impact on all senses of supplier's human capital intensity as expected; (2) the impact of foreign ownership on a supplier's human capital is higher for white collar intensity-(general) than for engineer intensity-(specific); (3) being an older or larger supplier negatively (and significantly) impacts a supplier's specific human capital intensity, while performing R&D activities (having an R&D department), and being a firsttier supplier impact positively (and significantly). These findings reveal that smaller and younger first-tier foreign suppliers performing R&D activities employ more specific (engineers) human capital stock.

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Does good governance matter for FDI inflows? Evidence from Asian economies

Cited by 158 publications

References 42 publications

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Foreign direct investment: the role of institutional and cultural determinants

Determinants of Human Capital Intensity: An Empirical Analysis on Automotive Suppliers in Turkey

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